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Iridium Announces First Quarter 2023 Results

April 20, 2023

Iridium Communications Inc.reported financial results for the first quarter of 2023 and reiterated its full-year 2023 outlook. Net income was $9.8 million, or $0.08 per diluted share, for the first quarter of 2023, as compared to net income of $2.8 million, or $0.02 per diluted share, for the first quarter of 2022. Operational EBITDA ("OEBITDA")(1) for the first quarter was $111.9 million, as compared to $103.2 million for the prior-year period, representing a year-over-year increase of 8%. These results benefitted from growth in all business areas.

Iridium reported first-quarter total revenue of $205.3 million, which consisted of $139.3 million of service revenue and $66.0 million of revenue related to equipment sales and engineering and support projects. Total revenue increased 22% versus the comparable period of 2022, while service revenue grew 10% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, was 68% of total revenue for the first quarter of 2023.

The Company ended the quarter with 2,051,000 total billable subscribers, which compares to 1,781,000 for the year-ago period and is up from 1,999,000 for the quarter ended December 31, 2022. Total billable subscribers grew 15% year-over-year, driven by growth in commercial IoT.

"2023 is off to a strong start, as we continued to enjoy double-digit sales growth in our Commercial Business and saw another record quarter of equipment sales," said Matt Desch, CEO, Iridium. Desch added, "We continue to see strong demand for equipment from our partner community and believe that new product and service rollouts this year will drive strong subscriber growth and service revenue gains."

Commenting on Iridium's cash flow and liquidity, Desch said, "Our strong balance sheet and another quarter of robust cash flow continue to support ongoing business investment and the return of capital to Iridium's shareholders.  In the first quarter, Iridium paid its inaugural dividend to common shareholders and repurchased more than $53 million of common stock. Together, these activities are expected to return approximately $245 million of capital to Iridium's shareholders in 2023."

Iridium Business Highlights

Service – Commercial

Commercial service remained the largest part of Iridium's business, representing 55% of the Company's total revenue during the first quarter. The Company's commercial customer base is diverse and includes markets such as maritime, aviation, oil and gas, mining, recreation, forestry, construction, transportation and emergency services. These customers rely on Iridium's products and services as critical to their daily operations and integral to their communications and business infrastructure.

·       Commercial service revenue was $112.8 million, up 13% from last year's comparable period due to broad-based growth across all revenue lines.

·       Commercial voice and data: Revenue was $52.4 million, up 17% from the year-ago period. Subscribers grew 4% from the year-ago period to 395,000. Average revenue per user ("ARPU") was $44 during the first quarter, compared to $40 in the prior-year period, on higher access fees.

·       Commercial IoT data: Revenue was $32.0 million, up 12% from the year-ago period. Subscribers grew 21% from the year-ago period to 1,501,000 customers, driven by continued growth in consumer personal communications devices. ARPU was $7.22 in the first quarter, compared to $7.78 in last year's comparable period. The decrease in ARPU resulted primarily from customer mix, including the effect of the growing proportion of personal communications subscribers, who typically utilize lower ARPU plans.

·       Commercial broadband: Revenue was $13.4 million, up 17% from $11.5 million in the year-ago period on increasing activations of Iridium Certus® broadband service. ARPU was $294 during the first quarter, compared to $288 in last year's comparable period, reflecting an increasing mix of broadband subscribers using Iridium Certus.

·       Iridium's commercial business ended the quarter with 1,912,000 billable subscribers, which compares to 1,635,000 for the prior-year quarter and is up from 1,860,000 for the quarter ended December 31, 2022. IoT data subscribers represented 79% of billable commercial subscribers at the end of the quarter, an increase from 76% at the end of the prior-year period.

·       Hosted payload and other data service revenue was $15.0 million in the first quarter, up 2% from $14.8 million in the year-ago period.

Service – U.S. Government

Iridium's voice and data solutions improve situational awareness for military personnel and track critical assets in tough environments around the globe, providing a unique value proposition that is not easily duplicated.

Under Iridium's Enhanced Mobile Satellite Services contract (the "EMSS Contract"), a seven-year, $738.5 million fixed-price airtime contract with the U.S. Space Force signed in September 2019, Iridium provides specified satellite airtime services, including unlimited global standard and secure voice, paging, fax, Short Burst Data®, Iridium Burst®, RUDICS and Distributed Tactical Communications System services for an unlimited number of Department of Defense and other federal government subscribers. Iridium also provides maintenance and support work for the U.S. government's dedicated Iridium gateway under two other contracts with the U.S. Space Force. Iridium Certus airtime services are not included under these contracts and may be procured separately for an additional fee.

·       Government service revenue remained flat at $26.5 million in the first quarter, reflecting the contractual rate in the EMSS Contract.

·       Iridium's U.S. government business ended the quarter with 139,000 subscribers, which compares to 146,000 for the prior-year quarter and 139,000 for the quarter ended December 31, 2022. Government voice and data subscribers decreased 8% from the year-ago period to 60,000 as of March 31, 2023. Government IoT data subscribers decreased 2% year-over-year and represented 57% of government subscribers at year-end. The number of subscribers continues to be negatively affected by the government's shift in contract administration between agencies.


·       Equipment revenue was $41.7 million in the first quarter, up 24% compared to $33.7 million in the prior-year quarter.

·       In 2023, the Company expects equipment sales in line with 2022's record level.

Engineering & Support

·       Engineering and support revenue was $24.2 million during the first quarter, compared to $8.4 million in the prior-year quarter, due to a rise in both commercial and government activity.

·       The Company expects Engineering and Support revenue in 2023 to be higher than 2022 primarily due to the full year impact of the Space Development Agency contract, which was granted in mid-2022.

Capital expenditures were $22.9 million for the first quarter, including $1.3 million in capitalized interest. The Company ended the first quarter with gross debt of $1.5 billion and a cash and cash equivalents balance of $126.6 million, for a net debt balance of $1.4 billion.

Iridium paid its inaugural dividend of $0.13 per common share on March 30, 2023, resulting in $16.4 million in payments to stockholders.

During the quarter, the Company repurchased approximately 0.9 million shares of its common stock under its previously announced share repurchase program at a total purchase price of $53.1 million. As of March 31, 2023, $126.5 million remained available and authorized for repurchase under this program.

2023 Outlook

The Company reiterated its full-year 2023 outlook:

·       Total service revenue growth between 9% and 11% for full-year 2023. Total service revenue for 2022 was $534.7 million.

·       Full-year 2023 OEBITDA between $455 million and $465 million. OEBITDA for 2022 was $424.0 million.

·       Negligible cash taxes in 2023. Cash taxes are expected to be negligible through approximately 2024.

·       Net leverage of between 2.5 and 3.5 times OEBITDA at the end of 2023, assuming the completion of the Company's total $600.0 million share repurchase authorization and the payment of four quarters of dividends. Net leverage was 3.2 times OEBITDA at December 31, 2022.

(1)  Non-GAAP Financial Measures & Definitions

In addition to disclosing financial results that are determined in accordance with U.S. GAAP, the Company provides Operational EBITDA, which is a non-GAAP financial measure, as a supplemental measure to help investors evaluate the Company's fundamental operational performance. Operational EBITDA represents earnings before interest, income taxes, depreciation and amortization, income (loss) on equity method investments, net, and share-based compensation expenses. Such charges are incidental to, but not reflective of, the Company's day-to-day operating performance. Operational EBITDA does not represent, and should not be considered, an alternative to U.S. GAAP measurements such as net income or loss. In addition, there is no standardized measurement of Operational EBITDA, and the Company's calculations thereof may not be comparable to similarly titled measures reported by other companies. The Company believes Operational EBITDA is a useful measure across time in evaluating its fundamental core operating performance. Management also uses Operational EBITDA to manage the business, including in preparing its annual operating budget, debt covenant compliance, financial projections and compensation plans. The Company believes that Operational EBITDA is also useful to investors because similar measures are frequently used by securities analysts, investors and other interested parties in their evaluation of companies in similar industries. As indicated, Operational EBITDA does not include interest expense on borrowed money, the payment of income taxes, amortization of the Company's definite-lived intangible assets, or depreciation expense on the Company's capital assets, which are necessary elements of the Company's operations. Since Operational EBITDA does not account for these and other expenses, its utility as a measure of the Company's operating performance has material limitations. Due to these limitations, the Company's management does not view Operational EBITDA in isolation, but also uses other measurements, such as net income (loss), revenues and operating profit, to measure operating performance.

Iridium Communications Inc.

Supplemental Reconciliation of GAAP Net Income to Operational EBITDA

(In thousands)

Three Months Ended March 31,



GAAP net income

$                9,775

$                2,824

Interest expense, net



Income tax (benefit) expense



Depreciation and amortization



Share-based compensation



Loss on equity method investments 


Operational EBITDA

$             111,948

$             103,206

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